BALTIMORE — As student loan payments increase for many borrowers, a Maryland tax credit program could save taxpayers hundreds or even thousands on their student loan debt.
As of August 1, interest resumed on student loans enrolled in the SAVE Plan, impacting over 7 million borrowers nationwide. For Maryland residents, there's a way to bring down loan balances and save money over the life of the loan, but time is running out to apply.
"It is so high, it's scary," said Cam Hardin, a student loan borrower who is trying to keep up with her monthly payments.
"$1,100. I dissolved into tears because I was very concerned," said Hardin.
She's not alone. According to a Pew Research study, 1 in 4 U.S. adults under 40 have student loan debt, with the median borrower owing between $20,000 and $25,000.
"So coming out of our Maryland public institutions, undergraduates are coming out with about $22,000 [in student loan debt]. From our Maryland HBCUs, that amount increases to about $28,000," said Kristin Clarkson, director of communications for the Maryland Higher Education Commission (MHEC).
But if you live in Maryland and pay taxes here, money to pay off those loans could be as simple as filling out an application.
"The average amount of the tax credit is about $1,870 and it goes up to a maximum of about $5,000," said Clarkson.
It's called the Student Loan Debt Relief Tax Credit and it's offered through the Maryland Higher Education Commission. It's available to Maryland taxpayers who initially incurred at least $20,000 in loans with at least $5,000 outstanding at the time of application.
To qualify, applicants must:
- Maintain Maryland residency for the 2025 tax year
- File 2025 Maryland state income taxes
- Have initially incurred at least $20,000 in undergraduate and/or graduate student loan debt
- Have at least $5,000 in outstanding student loan debt at the time of application
- Be actively making payments on their student loans
"Most people that apply do qualify for some amount of money, so we want to make sure that people know, don't count yourself out, because it is very likely that you will qualify for at least some amount of money," said Clarkson.
Last year, nearly 85 percent of applicants received a credit. This year, the total award amount has been cut in half but there's still $9 million to give away with state employees receiving priority. There's no limit to how many years borrowers can apply.
Applications must be submitted by September 15.
"The one issue that a lot of folks run into is getting that information from their lender and their tax preparer. So that's why you want to start. Go ahead and get started now to make sure that you're able to get that information before the deadline," said Clarkson.
Recipients of the credit must apply the full amount towards their student loan debt. If they don't provide the receipts to the state, then they'll have to repay the credit.
Borrowers have 3 years to prove they put the credit towards their loan, and applicants should hear by December if they were approved and the credit amount.
For additional help with federal student loans, click here to use the repayment loan simulator, which provides scenarios for lowering your monthly payments or paying less in interest.
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